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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MACRO ANALYSIS
- Latest personal incomes and spending data saw the household savings ratio unexpectedly rise to a 4-month high in May at 3.9%, up from 3.7% prior (revised up from 3.6%), hinting at American households becoming slightly more cautious in mid-Q2.
- In trend terms it marks a broad stabilization in the savings rate and, for now, an end to the tailwind to consumption seen through 2H23 when consumers reversed the prior uplift in their savings behavior.
- We see asymmetrical risks to the savings rate going ahead. Persistent sub-4% rates are historically rare; prior to the post-pandemic period they were last seen in the imbalances in the build up to the Great Financial Crisis. The post-pandemic period has been different owing to the unprecedent accumulation of aggregate savings, but these theoretical stocks have mostly been exhausted.
- The concept of “excess savings” is heavily influenced by assumptions for prior trends but estimates we have seen suggest either a relatively small amount is left or none at all. Specifically, our calculations using methodology previously published by Federal Reserve economists (relying on a 2015-19 log-linear trend, note here) show $350bn or 1.3% GDP of excess savings as of Q1 vs the huge $2.25tn (9.5% GDP) in late 2021. Alternatively, SF Fed economists wrote in May that excess savings have been fully depleted after peaking at $2.1tn (note here).
- The hypothetical nature of the concept and the wide range to estimates means that we should take these figures with caution, but the broad trend is that a major tailwind for consumption in the post-pandemic period looks to have come to an end.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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